All Forum Posts by: Susan Gillespie

I would wager that a CPA could find more deductions and also provide peace of mind that your taxes are accurate, especially when this is new to you.

Check with @Adam Hardy  , CPA at Jenson & Co in Maple Grove. I met him through MNREIA and has rentals himself. 

And congrats on the duplex.

Hi @Kyle Soderman my family is from St. Cloud. I've always thought there were good investment opportunities there. St. Cloud recently made the list of Top 10 Fastest Growing Cities, along with other big college towns. 

http://www.housingwire.com/articles/31408-top-10-f...

Good luck with your REI journey.

Hi @Mark Albano yes, you need to dig deeper into the numbers.

Your question is about cash flow analysis.

At first blush, the average rent you posted isn't even 1% of list price. At $124k, you would want to see monthly rents closer to $1200 at minimum. You would never buy based on that guideline alone, but it's a starting point. From there, add your other expenses, from vacancy to insurance to repairs, to estimate what the property will really cost you.

Example: $599 mortgage, $107 tax, $145 HOA = $851/month PLUS insurance, repairs, vacancy, property management, PMI, etc.

Your example as-is creates negative cash flow.

For beginning investors, it's extremely important to look for positive net cash flow. This means that after all expenses are paid, including mortgage, the property leaves you with money in your pocket.

You're asking good questions and hopefully will find something that works for you.

PS - Ask the real estate agent what "perfect investment property" means. Then ask them about cash flow, and how they came to that conclusion. Then look for a real estate agent who owns rental properties themselves and knows what to look for.

@Glenn Willeford 

IRR changes over time, based on the timing and amount of cash flows. You can use it to evaluate the entire transaction, from buy to sell, and you can vary the holding period to compare return (hold for 5 years vs 20, for example).

Many people assume buy-and-hold means a long period of time, but you don't have to hold indefinitely to maximize your return.

The limitation of cap rate or COCR is that it looks at a one year period. If you buy distressed, improve, rent and hold for several years, the one year view doesn't fully inform.

What type of property are you evaluating?

Hi @Sam Hodgett hope your move went well. Rental demand is strong in the Twin Cities, but so is pricing for desirable rental property. If you're an owner-occupant, you'll have advantages in terms of financing and avoiding investor exclusions.

I'd like to hear more about your storytelling business. My background is in marketing. Do you target clients in certain industries? I'm also happy to talk investing. 

Hi @Kayla Joachim I wish my younger self would have purchased an income property as my first home. You can generate income, learn from the experience, and get a solid start building your portfolio.

Regarding rents and demand, I would talk with a property manager with rentals in the area. As others have said, I wouldn't assume you can easily bump up the rent. Be careful that your real estate agent is advising on rents - ask him/her to validate those numbers.

Regarding your evaluation, if you purchased at $495k, I calculate negative cash flow and return, even with rents of $4400. I don't see how you calculated ROI of 40-50%?

If you purchased at $440k, same rents, I still get negative cash flow and no return, based on the expenses you listed. PMI significantly eats into cash flow.

Two final cautions - You may be underestimating startup and closing costs, and I see no mention of vacancy. I typically calculate one month per year, or 8%.

Finally, property management with four units can become a part time job. Will you take that on yourself? I would consider hiring a property manager, at minimum to advertise, screen and lease, unless you have prior experience.

One advantage you have is that prices may soften going into the holiday season. November to December can be a good time to buy, due to low demand and seller price concessions. 

Good luck with your search.

Thanks @Aly W. . I keep looking for better insurance options in FL, other than being underinsured. I find premiums are many times higher than my home market, I can't get my group discounts and coverage is skimpier. And then there's flood insurance. Definitely harder to manage risk. 

Hi @Andre Smith , I grew up in West St. Paul and my husband is a Navy vet with a background similar to yours.  Real estate investing has helped us achieve many of our financial goals, but it's not quick, easy or risk-free. 

I'm not sure what you're looking for in terms of a mentor, but I don't recommend spending a lot on expensive coaching. There are many free meetups and other events in the Twin Cities where you can meet all kinds of people in different areas of REI and keep learning.

Feel free to connect or email me if you have questions on long-term buy and holds, our area of focus. We've more than happy to help a vet if we can.

Susan

@Aly W. can you elaborate on insurance expense for your condos? "... as the insurance is very low (even with the expense of the HOA)..." 

How have you found competitive pricing? Any tips to share?

Hi @Keith K. , real estate investing means different things to different people. To me, it's about owning properties that have positive net cash flow, appreciate in value, attract quality tenants and produce double-digit returns.

Like you, I had a less than great experience with my first property, but I still have it, I learned a ton, and other people paid the mortgage for 10+ years. Every challenge with the place has been an opportunity to learn.

I think you probably learned a lot from your first experience, even if it wasn't what you hoped for financially. Give yourself credit for trying and learning.

Regarding property management, I think it's best to hire a pro unless you have significant experience to do it yourself. You'll pay management fees, but you'll learn as you go and hopefully eliminate many of the contract/legal/etc issues that can crop up.

As for the spouse issue, I'm not sure what to say other than try to talk through the issues and opportunities, including expectations on both sides. I would like to see more women in REI and hope you can find common ground.